Is Lululemon Athletica inc. (NASDAQ:LULU) a superb investment now? Hedge funds are becoming less hopeful. The number of long hedge fund positions stayed the same which is a slightly negative development in our experience
According to most market participants, hedge funds are assumed to be unimportant, old financial vehicles of yesteryear. While there are greater than 8000 funds in operation at present, we choose to focus on the upper echelon of this group, about 450 funds. Most estimates calculate that this group oversees the majority of the smart money’s total asset base, and by monitoring their highest performing equity investments, we have figured out a few investment strategies that have historically outperformed Mr. Market. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).
Equally as beneficial, positive insider trading sentiment is another way to parse down the world of equities. As the old adage goes: there are lots of incentives for a corporate insider to drop shares of his or her company, but just one, very obvious reason why they would behave bullishly. Various academic studies have demonstrated the useful potential of this tactic if investors know where to look (learn more here).
Keeping this in mind, we’re going to take a gander at the latest action regarding Lululemon Athletica inc. (NASDAQ:LULU).
How have hedgies been trading Lululemon Athletica inc. (NASDAQ:LULU)?
At the end of the first quarter, a total of 21 of the hedge funds we track were bullish in this stock, a change of 0% from the previous quarter. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings significantly.
According to our comprehensive database, Stephen Mandel’s Lone Pine Capital had the largest position in Lululemon Athletica inc. (NASDAQ:LULU), worth close to $335.1 million, accounting for 1.7% of its total 13F portfolio. The second largest stake is held by James Crichton and Adam Weiss of Scout Capital Management, with a $120 million position; the fund has 1.5% of its 13F portfolio invested in the stock. Remaining hedgies with similar optimism include Chase Coleman and Feroz Dewan’s Tiger Global Management LLC, Patrick McCormack’s Tiger Consumer Management and Sanford J. Colen’s Apex Capital.
Judging by the fact that Lululemon Athletica inc. (NASDAQ:LULU) has experienced a declination in interest from the entirety of the hedge funds we track, it’s safe to say that there exists a select few funds that elected to cut their full holdings heading into Q2. Interestingly, David Stemerman’s Conatus Capital Management dropped the largest stake of the “upper crust” of funds we key on, comprising an estimated $67.4 million in stock., and Donald Chiboucis of Columbus Circle Investors was right behind this move, as the fund said goodbye to about $43.6 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
How are insiders trading Lululemon Athletica inc. (NASDAQ:LULU)?
Insider buying is most useful when the company we’re looking at has experienced transactions within the past six months. Over the last half-year time frame, Lululemon Athletica inc. (NASDAQ:LULU) has seen zero unique insiders purchasing, and 5 insider sales (see the details of insider trades here).
Let’s check out hedge fund and insider activity in other stocks similar to Lululemon Athletica inc. (NASDAQ:LULU). These stocks are Carter’s, Inc. (NYSE:CRI), Hanesbrands Inc. (NYSE:HBI), Gildan Activewear Inc (USA) (NYSE:GIL), Under Armour Inc (NYSE:UA), and PVH Corp (NYSE:PVH). This group of stocks are in the textile – apparel clothing industry and their market caps are closest to LULU’s market cap.